cash (1)

PoliticsApril 29, 2022

A cashless society? Not our future, New Zealanders tell Reserve Bank

cash (1)

Public responses to the Reserve Bank’s discussion papers on the future of currency in Aotearoa made one thing very clear, writes Samson Samasoni.

New Zealanders don’t want cash to be done away with, even if the Reserve Bank introduces a digital currency.

That was the overwhelming response from the public to three discussion papers the bank released last year looking at the future of our cash system, the bank’s stewardship role and whether a central bank digital currency (CBDC) is right for Aotearoa.

The Reserve Bank today released a summary of the 6,882 responses it received – about 92% were in relation to the idea of a digital currency.

The majority of respondents supported having a well-functioning cash system, with some saying access to cash is a basic human right. One person said it was “as important to the whole population as access to clean water”.

People told the Reserve Bank they value the privacy of cash, and its tangibility or physicality, also that they feel safer and less anxious knowing they have cash in their wallets.

The Reserve Bank is looking at the future of our money, partly in response to the “significant and steady reduction” in the use of cash prior to the Covid-19 pandemic.

In 2019 cash was only used for 13% of all transactions, according to the Household Economic Survey. But the bank expects the downward trend was accelerated during the pandemic and that the 2021 data being released later this year will show it’s even lower.

One solution being canvassed by the bank is the introduction of a CBDC – an electronic form of central bank money, which can be used instead of banknotes and coins.

Like physical notes and coins, CBDC is issued by a central bank but you don’t need a bank account to use it, and anyone who holds CBDC has a legal claim on the government. 

According to American think tank Atlantic Council, 24 countries have introduced or are piloting CBDCs and a further 63 are exploring it, including Aotearoa.

Overseas, a CBDC is typically available on a payment card or a digital wallet on your phone.

Some countries see CBDC as a way to encourage “financial inclusion”. For example, in the United States, it’s estimated about 14 million people are unbanked (have no bank account) and 50 million are underbanked (have accounts but operate outside the bank for financial services such as money orders, cashing cheques, payday loans etc).

However, the Reserve Bank reiterated the point made in its discussion papers that there is no intention to replace cash with a digital currency. Reserve Bank governor Adrian Orr emphasised that point earlier this year when he warned New Zealand’s money and cash system is at a “crossroad” and innovation is necessary to build a sustainable future.

“We must decide how best to use digital technology to modernise central bank money, while we continue to ensure cash remains an option for those who need it,” he said.

The public feedback confirms there is strong support for ensuring cash remains available and accepted, and for the Reserve Bank taking on a broad stewardship role for money and cash. The Reserve Bank’s director of money and cash, Ian Woolford, says the public feedback also reinforced the importance of the privacy aspects of central bank money, and that it should be a critical feature of any potential CBDC for Aotearoa.

Many respondents to the survey feared an inevitable loss of privacy and felt anonymity was a key benefit of cash. Some were worried about the intrusion by public authorities and disliked CBDC because of its “supposed connections with government and the potential for overreach”. 

There were also public concerns about the risks of cybersecurity and hacking/data theft, as well as the harm that would arise if cash became less available, especially for the vulnerable.

Many respondents highlighted that cash facilitates the social and cultural life of New Zealanders. Examples include parents using cash to teach children lifelong skills and money management, donating to charities and rewarding buskers, as well as cultural ceremonies such as a “wedding money dance”.

The feedback has made it clear to the bank that many New Zealanders are concerned about the rapid pace of change relating to cash. The bank accepts the need “to expeditiously develop options to redesign the cash system, while taking a comprehensive approach to consider different options”.

Public submissions were also adamant that New Zealanders should be fully consulted about the Reserve Bank’s work on the future of money. The bank plans further engagement through public consultations, working and advisory groups, workshops and surveys.

Mr Woolford says that while no decision has been made on whether a CBDC is right for New Zealand, “we will continue to explore this through further policy, research, experimentation, and proof-of-concept work”. One thing’s for sure: New Zealanders really love cash.


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Mad Chapman, Editor
Aotearoa continues to adapt to a new reality and The Spinoff is right there, sorting fact from fiction to bring you the latest updates and biggest stories. Help us continue this coverage, and so much more, by supporting The Spinoff Members.Madeleine Chapman, EditorJoin Members

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